Sec. 115JB: This Sec. provides that if the income tax payable on the total income of a Company is less that 18.5% of its book profit then, the book profit shall be deemed to be the total income of the Company and income tax @ 18.5% shall be payable on the same.
An amendment has been introduced whereby every assessee Company shall prepare its profit and loss accounts in accordance with Part II of Schedule IV to the Companies Act, 1956 and not Part II and III of Schedule IV as was previously provided.
The amendment also states that any insurance or a banking company or any company engaged in the generation or supply of electricity (Sec. 211 Company), shall prepare its profit and loss accounts in accordance with the provisions of the Act governing such a Company.
Further, the insertion of Explanation 1 (j) provides that where the amount standing in the revaluation reserve on the sale of the revalued asset, has not been credited to the Profit and loss account, such amount shall be added to the net profit for the purposes of computation of book profit.
Previously, if the assessee revalued the asset and sold the asset, the difference between the original cost and revaluation amount was not added to the book profits. Therefore, the assessee could revalue the asset and sell it at the revalued price thereby incurring no gain in book profits and avoiding MAT thereon. However, after the amendment MAT will be payable on the increase in value caused by revaluation on the transfer of asset.
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